CHAPTER I  

PRELIMINARY

1. (1) This Act may be called the Special Economic Zones Act,  2005.  

 (2) It extends to the whole of India.  

(3) It shall come into force on such date as the Central  Government may, by notification in the Official Gazette,  appoint, and different dates may be appointed for different  provisions of this Act and any reference in any such provision  to the commencement of this Act shall be construed as a  reference to the coming into force of that provision.

Short title, extent  and  

commencement.

Definitions.

2. In this Act, unless the context otherwise requires,-  (a) “appointed day” with reference to a Special Economic

Zone means the date on which the Special Economic Zone is  notified by the Central Government under sub-section (1) of  section 4;

(b) “Approval Committee” means an Approval Committee  constituted under sub-section (1) of section 13;  

(c) "authorised operations" means operations which may be  authorised under sub-section (2) of section 4 and sub-section  (9) of section 15;  

(d) “Authority” means a Special Economic Zone Authority  constituted under sub-section (1) of section 31;

(e) "Board” means the Board of Approval constituted under  sub-section (1) of section 8;  

(f) "Co-Developer" means a person who, or a State  Government which, has been granted by the Central  Government a letter of approval under sub-section (12) of  section 3;  

(g) “Developer” means a person who, or a State Government  which, has been granted by the Central Government a letter of  approval under sub-section (10) of section 3 and includes an  Authority and a Co-Developer;

(h) "Development Commissioner" means the Development  Commissioner appointed for one or more Special Economic  Zones under sub-section (1) of section 11;

(i) “Domestic Tariff Area” means the whole of India (including  the territorial waters and continental shelf) but does not include  the areas of the Special Economic Zones;  

(j) “entrepreneur” means a person who has been granted a  letter of approval by the Development Commissioner under  sub-section (9) of section 15;

(k) “existing Special Economic Zone” means every Special  Economic Zone which is in existence on or before the  commencement of this Act;  

(l) “existing Unit” means every Unit which has been set up on  or before the commencement of this Act;

(m) “export” means –  

(i) taking goods, or providing services, out of India, from a

Special Economic Zone, by land, sea or air or by any other  mode, whether physical or otherwise; or  

(ii) supplying goods, or providing services, from the Domestic  Tariff Area to a Unit or Developer; or  

(iii) supplying goods, or providing services, from one Unit to  another Unit or Developer, in the same or different Special  Economic Zone;

(n) “Free Trade and Warehousing Zone” means a Special  Economic Zone wherein mainly trading and warehousing and  other activities related thereto are carried on;

(o) “import” means-  

 (i) bringing goods or receiving services, in a Special  Economic Zone, by a Unit or Developer from a place outside  India by land, sea or air or by any other mode, whether  physical or otherwise; or  

 (ii) receiving goods, or services by, Unit or Developer  from another Unit or Developer of the same Special Economic  Zone or a different Special Economic Zone;

(p) "infrastructure facilities" means industrial, commercial or  social infrastructure or other facilities necessary for the  development of a Special Economic Zone or such other  facilities which may be prescribed;  

(q) “International Financial Services Centre” means an  International Financial Services Centre which has been  approved by the Central Government under sub-section (1) of  section 18;  

(r) “manufacture” means to make, produce, fabricate,  assemble, process or bring into existence, by hand or by  machine, a new product having a distinctive name, character or  use and shall include processes such as refrigeration, cutting,  polishing, blending, repair, remaking, re-engineering and  includes agriculture, aquaculture, animal husbandry,  floriculture, horticulture, pisciculture, poultry, sericulture,  viticulture and mining;

(s) "notification" means a notification published in the Official  Gazette and the expression “notify” shall be construed  accordingly;  

(t) “notified offences” means the offences specified as such  under sub-section (1) of section 21;

10 of 1949.

(u) “Offshore Banking Unit” means a branch of a bank located  in a Special Economic Zone and which has obtained the  permission under clause (a) of sub-section (1) of section 23 of  the Banking Regulation Act, 1949;

(v) “person” includes an individual, whether resident in India  or outside India, a Hindu undivided family, co-operative  society, a company, whether incorporated in India or outside  India, a firm, proprietary concern, or an association of persons  or body of individuals, whether incorporated or not, local  authority and any agency, office or branch owned or controlled  by such individual, Hindu undivided family, co-operative,  association, body, authority or company;  

(w) "prescribed" means prescribed by the rules made by the  Central Government under this Act;

2 of 1934

(x) “Reserve Bank” means the Reserve Bank of India  constituted under section 3 of the Reserve Bank of India Act,  1934;  

(y) “Schedule” means Schedules to this Act;  

(z) “services” means such tradable services which,-  

(i) are covered under the General Agreement on Trade  in Services annexed as IB to the Agreement  establishing the World Trade Organisation  concluded at Marrakes on the 15th day of April,  1994;  

(ii) may be prescribed by the Central Government for  the purposes of this Act; and  

(iii) earn foreign exchange;

(za) "Special Economic Zone" means each Special Economic  Zone notified under the proviso to sub-section (4) of section 3  and sub-section (1) of section 4 (including Free Trade and  Warehousing Zone) and includes an existing Special Economic  Zone;  

(zb) “State Government” means a State Government of the  State in which a Special Economic Zone is established or  proposed to be established;

(zc) "Unit" means a Unit set up by an entrepreneur in a Special  Economic Zone and includes an existing Unit, an Offshore  Banking Unit and a Unit in an International Financial Services  Centre, whether established before or established after  commencement of this Act;  

(zd) all other words and expressions used and not defined in

1 of 1944.

this Act but defined in the Central Excise Act, 1944, the  Industries (Development and Regulation) Act, 1951, the  Income–tax Act, 1961, the Customs Act, 1962 and the Foreign  Trade ( Development and Regulation) Act, 1992 shall have the  meanings respectively assigned to them in those Acts.

65 of 1951.  

43 of 1961.  

52 of 1962.  

22 of 1992.

CHAPTER II  

ESTABLISHMENT OF SPECIAL ECONOMIC ZONE

Procedure for  making  

proposal to  

establish  

Special  

Economic  

Zone.

3. (1) A Special Economic Zone may be established under this  Act, either jointly or severally by the Central Government,  State Government, or any person for manufacture of goods or  rendering services or for both or as a Free Trade and  Warehousing Zone.  

 (2) Any person, who intends to set up a Special Economic  Zone, may, after identifying the area, make a proposal to the  State Government concerned for the purpose of setting up the  Special Economic Zone.

(3) Notwithstanding anything contained in sub-section (2), any  person, who intends to set up a Special Economic Zone, may,  after identifying the area, at his option, make a proposal  directly to the Board for the purpose of setting up the Special  Economic Zone:

Provided that where such a proposal has been received  directly from a person under sub-section, the Board may grant  approval and after receipt of such approval, the person  concerned shall obtain the concurrence of the State  Government within the period, as may be prescribed.

(4) In case a State Government intends to set up a Special  Economic Zone, it may after identifying the area, forward the  proposal directly to the Board for the purpose of setting up the  Special Economic Zone:

Provided that the Central Government may:-  (a) after consulting the State Government  concerned;  

(b) without referring the proposal for setting up the  Special Economic Zone to the Board; and  

(c) after identifying the area;  

 suo moto set up and notify the Special Economic Zone

(5) Every proposal under sub-sections (2) to (4) shall be  made in such form and manner containing such particulars as  may be prescribed.

(6) The State Government may, on receipt of the proposal  made under sub-section (2), forward the same together with its  recommendations to the Board within such period as may be  prescribed.

(7) Without prejudice to the provisions contained in sub section (8), the Board may, after receipt of the proposal under  sub-section (2) to (4), approve the proposal subject to such  terms and conditions as it may deem fit to impose, or modify  or reject the proposal.

(8) The Central Government may prescribe the following  requirement for establishment of a Special Economic Zone,  namely:-  

 (a) the minimum area of land and other terms and  conditions subject to which the Board shall approve, modify  or reject any proposal received by it under sub-section (2) to  (4) ; and  

 (b) the terms and conditions, subject to which the  Developer shall undertake the authorised operations and his  obligations and entitlements.

Provided that different minimum are of land and other  terms and conditions referred to in clause (a) may be  prescribed by the Central Government for a class or classes of  Special Economic Zones.

(9) If the Board,-  

 (a) approves without any modification, the proposal  received under sub-section (2) to (4), it shall communicate the  same to the Central Government;

 (b) approves with modifications the proposal received  under sub-section (2) to (4), it shall, communicate such  modifications to the person or the State Government concerned  and if such modifications have been accepted by such person  or the State Government, the Board shall communicate the  approval to the Central Government;  

 (c) rejects the proposal, received under sub-section (2)  to (4), it shall record the reasons therefor and communicate the  rejection to the Central Government which shall intimate to the  State Government or the person concerned.

(10) The Central Government shall, on receipt of  communication under clause (a) or clause (b) of sub-section  (9), grant, within such time as may be prescribed, a letter of

approval on such terms and conditions and obligations and  entitlements as may be approved by the Board, to the  Developer, being the person or the State Government  concerned:  

 Provided that the Central Government may, on the  basis of approval of the Board, approve more than one  Developer in a Special Economic Zone in cases where one  Developer does not have in his possession the minimum area  of contiguous land, as may be prescribed, for setting up a  Special Economic Zone and in such cases, each Developer  shall be considered as a Developer in respect of the land in his  possession.

(11) Any person who, or a State Government which, intends to  provide any infrastructure facilities in the identified area  referred to in sub-section (2) to (4), or undertake any  authorised operation may, after entering into an agreement  with the Developer referred to in sub-section (10), make a  proposal for the same to the Board for its approval and the  provisions of sub-section (5) and sub-sections (7) to (10) shall,  as far as may be, apply to the said proposal made by such  person or State Government.  

(12) Every person or a State Government referred to in sub section (11), whose proposal has been approved by the Board  and who, or which, has been granted letter of approval by the  Central Government, shall be considered as a Co-Developer of  the Special Economic Zone.

(13) Subject to the provisions of this section and the letter of  approval granted to a Developer, the Developer may allocate  space or built up area or provide infrastructure services to the  approved units in accordance with the agreement entered into  by him with the entrepreneurs of such Units.

4. (1) The Developer shall, after the grant of letter of approval  under sub-section (10) of section 3, submit the exact  particulars of the identified area referred to in sub-section (2)  to (4) of that section, to the Central Government and  thereupon that Government may, after satisfying that the  requirements, under sub-section (8) of section 3 and other  requirements, as may be prescribed, are fulfilled, notify the  specifically identified area in the State as a Special Economic  Zone:

Establishment of  Special Economic  Zone and approval  and authorisation  to operate to,  

Developer.

 Provided that an existing Special Economic Zone shall  be deemed to have been notified and established in accordance  with the provisions of this Act and the provisions of this Act  shall, as far as may be, apply to such Zone accordingly:

 Provided further that the Central Government may,  after notifying the Special Economic Zone, if it considers  appropriate, notify subsequently any additional area to be  included as a part of that Special Economic Zone.

(2) After the appointed day, the Board may, authorise the  Developer to undertake in a Special Economic Zone, such  operations which the Central Government may authorise.

5. (1) The Central Government, while notifying any area as a  Special Economic Zone or an additional area to be included in  the Special Economic Zone and discharging its functions under  this Act, shall be guided by the following, namely:-

Guidelines for  

notifying special  Economic Zone.

(a) generation of additional economic activity  

(b) promotion of exports of goods and services;  

(c) promotion of investment from domestic and foreign  sources;  

(d) creation of employment opportunities;  

(e) development of infrastructure facilities; and  

f) maintenance of sovereignty and integrity of India, the  security of the State and friendly relations with foreign States.

Processing and  non-processing  areas.

6. The areas falling within the Special Economic Zones may  be demarcated by the Central Government or any authority  specified by it as-  

 (a) the processing area for setting up Units for activities,  being the manufacture of goods, or rendering services; or  

 (b) the area exclusively for trading or warehousing  purposes; or  

 (c) the non-processing areas for activities other than those  specified under clause (a) or clause (b).

Exemption  

from taxes,  

duties or cess.

7. Any goods or services exported out of, or imported into, or  procured from the Domestic Tariff Area by, -  

(i) a Unit in a Special Economic Zone; or  

(ii) a Developer;  

shall, subject to such terms, conditions and limitations, as may

be prescribed, be exempt from the payment of taxes, duties or  cess under all enactments specified in the First Schedule.

CHAPTER III  

CONSTITUTION OF BOARD OF APPROVAL

Constitution of  Board of  

Approval

8. (1) The Central Government shall, within fifteen days of the  commencement of this Act, by notification, constitute, for the  purposes of this Act, a Board to be called the Board of  Approval.

(2) The Board shall consist of-  

 (a) an officer not below the rank of an Additional Secretary  to the Government of India in the Ministry or Department of  the Central Government dealing with Commerce -  Chairperson, ex officio;

(b) two officers, not below the rank of a Joint Secretary to the  Government of India, to be nominated by the Central  Government to represent the Ministry or Department of the  Central Govt. dealing with revenue – Members, ex officio;

(c) one officer not below the rank of Joint Secretary to the  Government of India to be nominated by the Central  Government the Ministry or Department of the Central  Government dealing with economic affairs (financial services)  – Members, ex officio;

(d) such number of officers, not exceeding ten, not below the  rank of the Joint Secretary to the Government of India, to be  nominated by the Central Government to represent the  Ministries or Departments of the Central Government dealing  with commerce, industrial policy and promotion, science and  technology, small scale industries and agro and rural  industries, home affairs, defence, environment and forests, law,  overseas Indian affairs and urban development - Members, ex  officio;

(e) a nominee of the State Government concerned - Member,   ex officio;    

(f) the Director General of Foreign Trade or his nominee -   Member, ex officio;  

(g) the Development Commissioner concerned - Member, ex  officio;  

(h) a Professor in the Indian Institute of Management, being a  society registered under the Societies Registration Act, 1860 or  the Indian Institute of Foreign Trade, being a society registered  under the Societies Registration Act, 1860, as may be,  nominated by the Central Government - Member, ex officio;

21 of 1860.

(i) an officer not below the rank of Deputy Secretary to the  Government of India dealing with the Special Economic Zones  in the Ministry or Department of the Central Government,  dealing with commerce to be nominated by the Central  Government - Member-Secretary, ex officio:

 Provided that the member, being the Joint Secretary  nominated under clauses (b) to (d) of this sub-section, may, if  he is unable to attend the meeting of the Board, authorise any  other officer to attend the meeting of the Board on his behalf.

(3) The term of office of an ex officio Member shall come to  an end as soon as he ceases to hold the office by virtue of  which he was so nominated.  

(4) For the purpose of performing its functions, the Board may  co-opt as members such number of persons as it deems fit who  have special knowledge of, and practical experience in, matters  relating to, or relevant to activity connected with the Special  Economic Zones and any such person shall have the right to  take part in the discussions of the Board but shall not be  counted for the quorum and shall not be a member for any  other purpose and such person shall be entitled to receive such  allowances or fees, as the case may be, fixed by the Board.

(5) The Board shall meet at such times and places as may be  appointed by it and shall have the power to regulate its own  procedure.  

(6) One third of the total Members of the Board shall form a  quorum, and all the acts of the Board shall be decided by a  general consensus of the Members present.

(7) No act or proceeding of the Board shall be called in  question on the ground merely of existence of any vacancy in,  or any defect in the constitution of, the Board.  

(8) All orders and decisions of the Board and all other  instruments issued by it shall be authenticated by the signature  of the Member-Secretary, or any other Member as may be  authorised by the Board in this behalf.

9. (1) Subject to the provisions of this Act, the Board shall  have the duty to promote and ensure orderly development of  the Special Economic Zones.

Duties, powers and  functions of Board.

(2) Without prejudice to the generality of the provisions  contained in sub-section (1), the powers and functions of the  Board shall include –

 (a) granting of approval or rejecting proposal or

modifying such proposals for establishment of the Special  Economic Zones;  

 (b) granting approval of authorised operations to be  carried out in the Special Economic Zones by the Developer;  

 (c) granting of approval to the Developers or Units  (other than the Developers or the Units which are exempt from  obtaining approval under any law or by the Central  Government) for foreign collaborations and foreign direct  investments, (including investments by a person resident  outside India), in the Special Economic Zone for its  development, operation and maintenance;

65 of 1951.

 (d) granting of approval or rejecting of proposal for  providing infrastructure facilities in a Special Economic Zone  or modifying such proposals;  

 (e) granting, notwithstanding anything contained in  the Industries (Development and Regulation) Act, 1951, a  licence to an industrial undertaking referred to in clause (d) of  section 3 of that Act, if such undertaking is established, as a  whole or part thereof, or proposed to be established, in a  Special Economic Zone;

 (f) suspension of the letter of approval granted to a  Developer and appointment of an Administrator under sub section (1) of section 10;  

 (g) disposing of appeals preferred under sub-section  (4) of section 15;  

 (h) disposing of appeals preferred under sub-section (4)  of section 16;  

 (i) performing such other functions as may be  assigned to it by the Central Government.

(3) The Board may if so required for purposes of this Act or  any other law for the time being in force relating to Special  Economic Zones, by notification, decide as to whether a  particular activity constitutes manufacture as defined in clause  (r) of clause 2 and such decision of the Board shall be binding  on all Ministries and Departments of the Central Government.

(4) The Board may delegate such powers and functions as it  may deem fit to one or more Development Commissioners for  effective and proper discharge of the functions of the Board.

(5) Without prejudice to the foregoing provisions of this Act,  the Board shall, in exercise of its powers or the performance of  its functions under this Act, be bound by such directions on the

questions of policy as the Central Government may give in  writing to it from time to time.

(6) The decision of the Central Government whether a  question is one of policy or not shall be final.

Suspension of  letter of  

approval and  

transfer of  

Special  

Economic  

Zone in certain  cases.

10. (1) If at any time the Board is of the opinion that a  Developer -  

(a) is unable to discharge the functions or perform the duties  imposed on him by or under the provisions of this Act or rules  made thereunder; or  

(b) has persistently defaulted in complying with any direction  given by the Board under this Act; or  

(c) has violated the terms and conditions of the letter of  approval; or  

(d) whose financial position is such that he is unable to fully  and efficiently discharge the duties and obligations imposed on  him by the letter of approval, and

the circumstances exist which render it necessary for it in  public interest so to do, the Board may, on application, or with  the consent of the Developer, or otherwise, for reasons to be  recorded in writing, suspend the letter of approval, granted to  the Developer for a whole or part of his area established as  Special Economic Zone, for a period not exceeding one year  and appoint an Administrator to discharge the functions of the  Developer in accordance with the terms and conditions of the  letter of approval and manage the Special Economic Zone  accordingly.

(2) Consequent upon appointment of an Administrator, the  management of the Special Economic Zone of the Developer  referred to in sub-section (1) shall vest in the Administrator.

(3) No letter of approval shall be suspended under sub-section  (1) unless the Board has given to the Developer not less than  three months’ notice, in writing, stating the grounds on which  it proposes to suspend the letter of approval, and has  considered any cause shown by the Developer within the  period of that notice, against the proposed suspension.

(4) The Board may, instead of suspending the letter of  approval under sub-section (1), permit it to remain in force  subject to such further terms and conditions as it thinks fit to  impose, and any further terms or conditions so imposed shall  be binding upon and be complied with by the Developer and  shall be of like force and effect as if they were contained in the

letter of approval.  

(5) In case the Board suspends a letter of approval under this  section, it shall serve a notice of suspension upon the  Developer and fix a date on which the suspension shall take  effect.

(6) Upon suspension of the letter of approval under sub section (1), the Special Economic Zone of the Developer  referred to in sub-section (5) shall vest in the Administrator  under sub-section (2) for a period not exceeding one year or up  to the date on which his letter of approval for such Special  Economic Zone is transferred, whichever is earlier, in  accordance with the provisions contained in sub-sections (7)  and (9), as the case may be.

(7) Where the Board has given notice for suspension of letter  of approval under sub-section (5), the Developer may, after  prior approval of the Board, transfer his letter of approval to  any person who is found eligible by the Board for grant of such  approval.

(8) If at any time, it appears to the Board that the purpose of  the order appointing the Administrator has been fulfilled or  that for any reason it is undesirable that the order of  appointment should remain in force, the Board may cancel the  order and thereupon the Administrator shall be divested of the  management of the Special Economic Zone which shall, unless  otherwise directed by the Board, again vest in the person,  being the Developer, in whom it was vested immediately prior  to the date of appointment of the Administrator.

(9) Where the Board suspends the letter of approval, under  this section, in respect of any Developer, the following  provisions shall apply, namely:-  

 (a) the Board shall invite applications for transferring  the letter of approval of the Developer, whose approval has  been suspended and select the person or persons, in accordance  with the procedure as may be prescribed, to whom the letter of  approval of the Developer in the Special Economic Zone may  be transferred;

 (b) upon selection of person or persons under sub section (a), the Board may, by notice in writing, require the  Developer to transfer his letter of approval in a Special  Economic Zone to the person or the persons so selected and  thereupon the Developer shall transfer his interests, rights and  liabilities in the Special Economic Zone (hereafter in this  section referred to as the “transferee”) who has been selected  by the Board on such terms and conditions and consideration

as may be agreed upon between the Developer and the  transferee;

 (c) all the rights, duties, obligations and liabilities of  the Developer, on and from the date of suspension of letter of  approval or on and from the date, if earlier, on which his letter  of approval in the Special Economic Zone of the Developer  has been transferred to the transferee, shall cease absolutely  except for any liabilities which have accrued prior to that date;

 (d) the Board may make such interim arrangements in  regard to the operation of the Special Economic Zone as may  be considered appropriate;

 (e) the Administrator shall exercise such powers and  discharge such functions as the Board may direct.

(10) The Board may, in order to promote exports or to protect  the interest of Units or in the public interest, issue such  directions or formulate such scheme as it may consider  necessary for operation of the Special Economic Zone.

CHAPTER IV  

DEVELOPMENT COMMISSIONER

11. (1) The Central Government may appoint any of its  officers not below the rank of Deputy Secretary to the  Government of India as the Development Commissioner of  one or more Special Economic Zones.

Development  

Commissioner.

 (2) The Central Government may appoint such officers  and other employees as it considers necessary to assist the  Development Commissioner in the performance of his  functions in the Special Economic Zones established by a  Developer (other than Central Government) under this Act on  such terms and conditions as it deems fit.

 (3) Every Development Commissioner, officers and other  employee shall be entitled to such salary and allowances and  subject to such terms and conditions of service in respect of  leave, pension, provident fund and other matters as may, from  time to time, be specified by the Central Government.

.

12. (1) Every Development Commissioner shall take all steps  in order to discharge his functions under this Act to ensure  speedy development of the Special Economic Zone and  promotion of exports therefrom.

Functions of  

Development  

Commissioner

(2) Without prejudice to the generality of the foregoing  provisions, the Development Commissioner shall-

 (a) guide the entrepreneurs for setting up of Units in  the Special Economic Zone;  

 (b) ensure and take suitable steps for effective  promotion of exports from the Special Economic Zone;

 (c) ensure proper co-ordination with the Central  Government or State Government Departments concerned or  agencies with respect to, or for the purposes, of clauses (a)  and (b);  

 (d) monitor the performance of the Developer and the  Units in a Special Economic Zone ;

 (e) discharge such other functions as may be assigned  to him by the Central Government under this Act or any other  law for the time being in force; and

 (f) discharge such other functions as may be delegated  to him by the Board.

(3) Every Development Commissioner shall be overall in  charge of the Special Economic Zone and shall exercise  administrative control and supervision over the officers and  employees appointed under sub-section (2) of section 11  (including the officials deputed to such Special Economic  Zone) to discharge any of the functions under this Act.

(4) Without prejudice to the provisions of sub-section (1) to  (3), every Development Commissioner shall discharge such  functions and exercise such powers as may be delegated to him  by a general or special order by the Central Government or the  State Government concerned, as the case may be.

(5) Every Development Commissioner may call for such  information from a Developer or Unit from time to time as  may be necessary to monitor the performance of the Developer  or the Unit, as the case may be.

(6) The Development Commissioner, may, delegate any or all  of his powers or functions to any of the officers employed  under him.

CHAPTER V  

SINGLE WINDOW CLEARANCE

Constitution of  Approval  

Committee.

13. (1) The Central Government shall,-  

 (a) in the case of existing Special Economic Zones,  within six months from the date of commencement of this Act;

 (b) in case of other Special Economic Zones  established after the commencement of this Act, within six  months from the date of establishment of such Special  Economic Zone,  

by notification, constitute a Committee for every Special  Economic Zone, to be called the Approval Committee to  exercise the powers and perform the functions specified in  section 14.

(2) Every Approval Committee shall consist of –  

 (a) the Development Commissioner - Chairperson, ex  officio;  

 (b) two officers of the Central Government to be  nominated by the Central Government - Members, ex  officio;  

 (c) two officers of the Central Government to represent  the Ministry or Department dealing with revenue – Members,  ex officio;  

(d) one officer of the Central Government to be  nominated by that Government to represent the Ministry or  Department dealing with the economic affairs (financial  services) – Members, ex officio;  

 (e) two officers of the State Government concerned to  be nominated by that Stated Government – Member, ex  officio;  

(f) a representative of the Developer concerned – Special  invitee.

(3) For the purpose of exercising its powers and performing its  functions, the Approval Committee may invite to its meetings,  such persons as the Committee deems fit, whose assistance or  advice it may consider necessary.

(4) Every Approval Committee shall meet at such times  and places as it considers necessary and shall have the power  to regulate its own procedure.  

(5) One half of the total Members of the Approval  Committee shall form a quorum, and all the acts of the

Approval Committee shall be decided by a general consensus  of the Members present.  

Provided that in case the Approval Committee is unable  to decide any matter by a general consensus, such matter shall  stand referred to the Board of Approval.  

(6) No act of the Approval Committee shall be called in  question on the ground merely of existence of any vacancy in,  or any defect in the constitution of, the Approval Committee.  

(7) All orders and decisions of the Approval Committee  and all other communications issued by it shall be  authenticated by the signature of the Chairperson or any other  member as may be authorised by the Approval Committee in  this behalf.  

(8) The term of office of an ex officio Member shall come to  an end as soon as he ceases to hold the office by virtue of  which he was so nominated.

14. (1) Every Approval Committee may discharge the  functions and exercise the powers in respect of the following  matters, namely:-

Powers and  

functions of  

Approval  

Committee.

(a) approve the import or procurement of goods from the  Domestic Tariff Area, in the Special Economic Zone for  carrying on the authorised operations by a Developer;

(b) approve the providing of services by a service provider,  from outside India, or from the Domestic Tariff Area, for  carrying on the authorised operations by the Developer, in the  Special Economic Zone;  

(c) monitor the utilisation of goods or services or  warehousing or trading in the Special Economic Zone;

(d) approve, modify or reject proposals for setting up Units  for manufacturing or rendering services or warehousing or  trading in the Special Economic Zone [other than the grant of  licence under clause (e) of sub-section (2) of section 9] in  accordance with the provisions of sub-section (8) of section 15;  

Provided that where the Approval Committee is unable  to decide whether a particular process constitutes manufacture  or not, it shall refer the same to the Board of Approval for a  decision.  

(e) allow, on receipt of approval under clause (c) of sub section (2) of section 9, foreign collaborations and foreign

direct investments (including investments by a person outside  India) for setting up a Unit;

(f) monitor and supervise compliance of conditions subject to  which the letter of approval or permission, if any, has been  granted to the Developer or entrepreneur; and

(g) perform such other functions as may be entrusted to it by  the Central Government or the State Government concerned, as  the case may be.

(2) The Approval Committee shall not discharge such  functions and exercise such powers in relation to a Developer,  being the Central Government, as may be specified by  notification by the Central Government.  

 Provided that till such time, the Approval Committee is  constituted, the concerned Development Commissioner shall  discharge all functions and exercise all powers of the Approval  Committee.

15. (1) Any person, who intends to set up a Unit for carrying  on the authorised operations in a Special Economic Zone, may  submit a proposal to the Development Commissioner  concerned in such form and manner containing such particulars  as may be prescribed:  

 Provided that an existing Unit shall be deemed to have  been set up in accordance with the provisions of this Act and  such Units shall not require approval under this Act.

Setting up of Unit.

 (2) On receipt of the proposal under sub-section (1), the  Development Commissioner shall submit the same to the  Approval Committee for its approval.  

 (3) The Approval Committee may, either approve the  proposal without modification, or approve the proposal with  modifications subject to such terms and conditions as it may  deem fit to impose, or reject the proposal in accordance with  the provisions of sub-section (8):

 Provided that in case of modification or rejection of a  proposal, the Approval Committee shall afford a reasonable  opportunity of being heard to the person concerned and after  recording the reasons, either modify or reject the proposal.

(4) Any person aggrieved, by an order of the Approval  Committee, made under sub-section (3), may prefer an appeal  to the Board within such time as may be prescribed.  

(5) No appeal shall be admitted if it is preferred after the

expiry of the time prescribed therefor:  

 Provided that an appeal may be admitted after the  expiry of the period prescribed therefor if the appellant  satisfies the Board that he had sufficient cause for not  preferring the appeal within the prescribed time.

(6) Every appeal made under sub-section (4) shall be in such  form and shall be accompanied by a copy of the order appealed  against and by such fees as may be prescribed.  

(7) The procedure for disposing of an appeal shall be such as  may be prescribed:  

 Provided that before disposing of an appeal, the  appellant shall be given a reasonable opportunity of being  heard.

(8) The Central Government may prescribe,-  

 (a) the requirements (including the period for which a  Unit may be set up) subject to which the Approval Committee  shall approve, modify or reject any proposal referred to in sub section (3);  

 (b) the terms and conditions, subject to which the Unit  shall undertake the authorised operations and its obligations  and entitlements.  

(9) The Development Commissioner may, after approval of the  proposal referred to in sub-section (3), grant a letter of  approval to the person concerned to set up a Unit and  undertake such operations which the Development  Commissioner may authorise and every such operation so  authorised shall be mentioned in the letter of approval.

Cancellation of  letter of  

approval to  

entrepreneur.

16. (1) The Approval Committee may, at any time, if it has any  reason or cause to believe that the entrepreneur has persistently  contravened any of the terms and conditions or its obligations  subject to which the letter of approval was granted to the  entrepreneur, cancel the letter of approval:

 Provided that no such letter of approval shall be  cancelled unless the entrepreneur has been afforded a  reasonable opportunity of being heard.

(2) Where the letter of approval has been cancelled under sub section (1), the Unit shall not from the date of such  cancellation, be entitled to any exemption, concession, benefit

or deduction available to it, being a Unit, under this Act.

(3) Without prejudice to the provisions of this Act, the  entrepreneur whose letter of approval has been cancelled under  sub-section (1), shall remit, the exemption, concession,  drawback and any other benefit availed by him in respect of  the capital goods, finished goods lying in stock and unutilised  raw materials relatable to his Unit, in such manner as may be  prescribed.

(4) Any person aggrieved by an order of the Approval  Committee made under sub-section (1), may prefer an appeal  to the Board within such time as may be prescribed.  

(5) No appeal shall be admitted if it is preferred after the  expiry of the time prescribed therefor:  

 Provided that an appeal may be admitted after the  expiry of the period prescribed therefor if the appellant  satisfies the Board that he had sufficient cause for not  preferring the appeal within the prescribed time.

(6) Every appeal made under sub-section (4) shall be in such  form and shall be accompanied by a copy of the order appealed  against and by such fees as may be prescribed.  

(7) The procedure for disposing of an appeal shall be such as  may be prescribed:  

 Provided that before disposing of an appeal, the  appellant shall be given a reasonable opportunity of being  heard.

Setting up and  operation of  

Offshore  

Banking Unit.

17. (1) An application for setting up and operation of an  Offshore Banking Unit in a Special Economic Zone may be  made to the Reserve Bank in such form and manner as may be  prescribed.

 (2) On receipt of an application under sub-section (1), the  Reserve Bank shall, if it is satisfied that the applicant fulfills  all the conditions specified under sub-section (3), grant  permission to such applicant for setting up and operation of an  Off-shore Banking Unit.  

 (3) The Reserve Bank may, by notification, specify the  terms and conditions subject to which an Offshore Banking  Unit may be set up and operated in the Special Economic  Zone.

18. (1) The Central Government may approve the setting up of

Setting up of

an International Financial Services Centre in a Special  Economic Zone and may prescribe the requirements for setting  up and operation of such Center:  

 Provided that the Central Government shall approve  only one International Financial Services Centre in a Special  Economic Zone.

International  

Financial Services  Centre.

 (2) The Central Government may, subject to such  guidelines as may be framed by the Reserve Bank, the  Securities and Exchange Board of India, the Insurance  Regulatory and Development Authority and such other  concerned authorities, as it deems fit, prescribe the  requirements for setting up and the terms and conditions of the  operation of Units in an International Financial Services  Centre.  

19. Notwithstanding anything contained in any other law for  the time being in force, the Central Government may, if  required, -  

 (a) prescribe a single application form for obtaining  any licence, permission or registration or approval by a  Developer, or an entrepreneur under one or more Central Acts;

Single application  form, return, etc.

 (b) authorise the Board, the Development  Commissioner or Approval Committee, to exercise the powers  of the Central Government on matters relating to the  development of a Special Economic Zone; or setting up and  operation of units;  

 (c) prescribe a single form for furnishing returns or  information by a Developer or an entrepreneur under one or  more Central Acts.

20. Notwithstanding anything contained in any other law for  the time being in force, the Central Government may, by  notification, specify any officer or agency to carry out surveys  or inspections for securing of compliance with the provisions  of any Central Act by a Developer or an entrepreneur, as the  case may be, and such officer or agency shall submit  verification and compliance reports, in such manner and within  such time as may be specified in the said notification.

Agency to inspect.

21. (1) The Central Government may, by notification, specify  any act or omission made punishable under any Central Act, as  notified offence for purposes of this Act.

Single enforcement  officer or agency  for notified  

offences.

 (2) The Central Government may, by general or special  order, authorise any officer or agency to be the enforcement

officer or agency in respect of any notified offences or  committed in a Special Economic Zone.  

 (3) Every officer or agency authorised under sub-section (2)  shall have all the corresponding powers of investigation,  inspection or search or seizure as is provided under the  relevant Central Act in respect of the notified offences.

22. The agency or officer, specified under section 20 or  section 21, may, with prior intimation to the Development  Commissioner concerned, carry out the investigation or search  or seizure in the Special Economic Zone or in a Unit if such  agency or officer has reasons to believe (reasons to be recorded  in writing) that a notified offence has been committed or is  likely to be committed in the Special Economic Zone:  

 Provided that no investigation, search or seizure shall  be carried out in a Special Economic Zone by any agency or  officer other than those referred to in sub-section (2) or sub section of section 21 without prior approval of the  Development Commissioner concerned.  

 Provided further that any officer of agency, if so  authorised by the Central Government, may carry out the  investigation, inspection, search or seizure in the Special  Economic Zone or Unit without prior intimation or approval of  the Development Commissioner.

Investigation,  

inspection and  

search or seizure.

Designated  

Courts to try  

suits and  

notified  

offences.

23. (1) The State Government, in which the Special Economic  Zone is situated, may, with the concurrence of the Chief  Justice of the High Court of that State, designate one or more  courts-  

 (a) to try all suits of a civil nature arising in the Special  Economic Zone; and  

 (b) to try notified offences committed in the Special  Economic Zone.

 (2). No court, other than the court designated under sub section (1), shall try any suit or conduct the trial of any notified  offence referred to in that sub-section:  

 Provided that the courts, in which any suit of a civil  nature in a Special Economic Zone had been filed before the  commencement of this Act, shall continue to try such suit after  such commencement:  

 Provided further that the courts in which any trial of  any notified offence is being conducted before the  commencement of this Act, shall continue to conduct the trial

of such offence after the commencement of this Act:  

 Provided also that the courts competent to try any  notified offence before the commencement of this Act, shall  conduct the trial in respect of such offence after the  commencement of this Act until the courts have been  designated under sub-section (1) and all such cases relating to  such trials shall thereafter be transferred to such Courts so  designated which shall conduct the trial from the stage at  which such cases were so transferred.  

Appeal to High  Court.

24. Any person aggrieved, by any decision or order of the court  designated under sub-section (1) of section 23, may file an  appeal to the High Court within sixty days from the date of  communication of the decision or order of the Courts so  designated to him on any question of fact or law arising out of  such orders:

 Provided that the High Court may, if it is satisfied that  the appellant was prevented by sufficient cause from filing an  appeal within the said period, allow it to be filed within a  further period not exceeding sixty days.  

Explanation.- In section 23 and this section “High Court”  means the High Court of the State in which the Special  Economic Zone is situated.

Offences by  

companies.

25. (1) Where an offence has been committed by a company,  every person, who at the time the offence was committed was  in charge of, and was responsible to, the company for the  conduct of the business of the company, as well as the  company, shall be deemed to be guilty of the offence and shall  be liable to be proceeded against and punished accordingly:

 Provided that nothing contained in this sub-section  shall render any such person liable to any punishment provided  for the offence, if he has proved that the offence was  committed without his knowledge or that he had exercised all  due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1),  where an offence has been committed by a company and it is  proved that the offence has been committed with the consent or  connivance of, or is attributable to any neglect on the part of,  any director, manager, secretary or other officer of the  company, such director, manager, secretary or other officer  shall also be deemed to be guilty of the offence and shall be  liable to be proceeded against and punished accordingly.

Explanation.- For the purposes of this section,-

(a) “company” means any body corporate and includes a  firm or other association of individuals; and  

(b) “director”, in relation to a firm, means a partner in the  firm.

CHAPTER VI  

Special Fiscal Provisions for Special Economic Zones

52 of 1962  

51 of 1975

26. (1) Subject to the provisions of sub-section (2), every  Developer and the entrepreneur shall be entitled to the  following exemptions, drawbacks and concessions, namely: -

Exemptions,  

drawbacks and  

concessions to  

every Developer  and entrepreneur.

52 of 1962.  

51 of 1975.  

1 of 1944.  

5 of 1986.

(a) exemption from any duty of customs, under the  Customs Act, 1962 or the Custom Tariff Act, 1975 or any  other law for the time being in force, on goods imported into,  or service provided in, a Special Economic Zone or a Unit, to  carry on the authorised operations by the Developer or  entrepreneur;  

(b) exemption from any duty of customs, under the  Customs Act, 1962 or the Customs Tariff Act, 1975 or any  other law for the time being in force, on goods exported from,  or services provided, from a Special Economic Zone or from a  Unit, to any place outside India:  

(c) exemption from any duty of excise, under the Central  Excise Act, 1944 or the Central Excise Tariff Act, 1985 or any  other law for the time being in force, on goods brought from  Domestic Tariff Area to a Special Economic Zone or Unit, to  carry on the authorised operations by the Developer or  entrepreneur;

(d) drawback or such other benefits as may be admissible from  time to time on goods brought or services provided from the  Domestic Tariff Area into a Special Economic Zone or Unit or  services provided in a Special Economic Zone or Unit by the  service providers located outside India to carry on the  authorised operations by the Developer or entrepreneur;

32 of 1994.  

23 of 2004.

(e) exemption from service tax under Chapter-V of the  Finance Act, 1994 on taxable services provided to a Developer  or Unit to carry on the authorised operations in a Special  Economic Zone;  

(f) exemption from the securities transaction tax leviable under  section 98 of the Finance (No. 2) Act, 2004 in case the taxable  securities transactions are entered into by a non-resident  through the International Financial Services Centre;

74 of 1956.

(g) exemption from the levy of taxes on the sale or purchase of  goods other than newspapers under the Central Sales Tax Act,  1956 if such goods are meant to carry on the authorised  operations by the Developer or entrepreneur.

(2) The Central Government may prescribe the manner in  which, and the terms and conditions subject to which, the  exemptions, concessions, drawback or other benefits shall be  granted to the Developer or entrepreneur under sub-section (1).

43 of 1961.

27. The provisions of the Income-tax Act, 1961, as in force for  the time being, shall apply to, or in relation to, the Developer  or entrepreneur for carrying on the authorised operations in a  Special Economic Zone or Unit subject to the modifications  specified in the Second Schedule.

Provisions of  

Income-tax Act,  

1961 to apply with  certain  

modification in  

relation to  

Developers and  

entrepreneurs.

28. The Central Government may prescribe the period during  which any goods brought into, or services provided in, any  Unit or Special Economic Zone without payment of taxes,  duties or cess shall remain or continue to be provided in such  Unit or Special Economic Zone.

Duration of goods  or services in  

Special Economic  Zones.

Transfer of  

ownership and  removal of  

goods.

29. The transfer of ownership in any goods brought into, or  produced or manufactured in, any Unit or Special Economic  Zone or removal thereof from such Unit or Zone shall be  allowed, subject to such terms and conditions as the Central  Government may prescribe.

Domestic  

clearance by  

Units.

30. Subject to the conditions specified in the rules made by the  Central Government in this behalf:-  

(a) any goods removed from a Special Economic Zone to the  Domestic Tariff Area shall be chargeable to duties of customs  including anti-dumping, countervailing and safeguard duties  under the Customs Tariff Act, 1975, where applicable, as  leviable on such goods when imported; and  

(b) the rate of duty and tariff valuation, if any, applicable to  goods removed from a Special Economic Zone shall be at the  rate and tariff valuation in force as on the date of such removal,  and where such date is not ascertainable, on the date of  payment of duty.  

CHAPTER VII  

SPECIAL ECONOMIC ZONE AUTHORITY

Constitution of  Authority.

31. (1) The Central Government shall, by notification in the  Official Gazette, constitute, for every Special Economic Zone  established by it before the commencement of this Act or  which may be established by it after such commencement by  the Central Government, an Authority to be called the ………  (name of the Special Economic Zone) Authority to exercise the  powers conferred on, and discharge the functions assigned to,  it under this Act:

 Provided that in respect of existing Special Economic  Zone established by the Central Government, such Authority  shall be constituted by the Central Government within six  months from the date of commencement of this Act:  

 Provided further that until such Authority is  constituted, the person or the authority including the  Development Commissioner exercising control over such  existing Special Economic Zones shall continue to exercise  such control over the Special Economic Zones till the  Authority is constituted.

(2) Every Authority shall be a body corporate by the name  aforesaid, having perpetual succession and a common seal,  with a power, subject to the provisions of this Act, to acquire,  hold and dispose of property, both movable and immovable,  and to contract and shall, by the said name, sue and be sued.  

 (3) The head office of every Authority shall be at such place  as the Central Government may specify in the notification  referred to in sub-section (1).

 (4) Any Authority may, with the previous approval of the  Central Government, establish branch offices at other places in  India.

 (5) Every Authority shall consist of -  

(a) the Development Commissioner of the Special Economic  Zone over which the Authority exercises its jurisdiction -   Chairperson, ex officio;  

(b) two officers of the Central Government to be nominated by  that Government having knowledge of, or experience in,  dealing with matters relating to Special Economic Zones -   Members, ex officio;  

(c) an officer of the Government of India in the Ministry or  Department dealing with Commerce on matters relating to  Special Economic Zone - Member, ex officio;

(d) not more than two persons being entrepreneurs or their  nominee, to be nominated by the Central Government -   Members,  ex officio;.

 (6) The term of office of the Members of an Authority (other  than ex officio Members) and the manner of filling of  vacancies shall be such as may be prescribed.  

 (7) An Authority may associate with itself in such manner,  subject to such conditions and for such purposes as may be  prescribed, any person whose assistance or advice it requires in  discharging its functions effectively and that person shall be  entitled to receive such allowances or fees as may be fixed by  the Authority.  

 (8) One third of the total Members of the Authority shall  form a quorum, and all the acts of the Authority shall be  decided by a majority of the Members present.

 (9) No act or proceeding of an Authority shall be invalidated  merely by reason of-  

 (a) any vacancy in, or any defect in the constitution of,  the Authority; or  

 (b) any defect in the appointment of a person acting as  a Member of the Authority; or  

 (c) any irregularity in the procedure of the Authority  not affecting the merits of the case.

(10) Every Authority shall meet at such times and places and  shall observe such rules of procedure in regard to the  transaction of business at its meetings (including quorum at  such meetings) as may be prescribed.

 32. (1) Every Development Commissioner of the Special  Economic Zone for which he is appointed as such shall be the  chief executive of the Authority concerned and exercise such  powers and perform such functions as may be prescribed.  

 (2) Every Authority may, in addition to the officers and  employees transferred to it under section 33, appoint such  other officers and employees, as it considers necessary for the  efficient discharge of its functions under this Act.  

 (3) The method of appointment, the conditions of service  and the scales of pay and allowances of such other officers and  employees appointed under sub-section (2) shall be such as

Officers of  

Authority and other  staff.

may be prescribed.

33. (1) It shall be lawful for the Central Government to transfer  to each Authority, by order, and with effect from such date or  dates, as may be specified in the order, any officer or other  employee holding office as such (except officers or other  employees on deputation) in the existing Special Economic  Zone concerned:

Special provision  for transfer of  

officers or other  

employees to  

Authority.

 Provided that the scale of pay of the post to which such  officer or other employee is transferred shall not be lower than  the scale of pay of the post which he was holding immediately  before such transfer and the other terms and conditions of  service (including pension, leave, provident fund and medical  benefits) of the post to which he is transferred shall not be less  favourable than the terms and conditions of service in relation  to the post held by him immediately before such transfer:

 Provided further that if, immediately before the date of his  transfer, any such officer or other employee is officiating in a  higher post under the Central Government either in a leave  vacancy or in any vacancy of a specified duration, his pay and  other allowances, if any, on transfer, shall be protected for the  unexpired period of such vacancy and thereafter he shall be  entitled to the scale of pay applicable to the post under the  Central Government to which he would have reverted but for  his transfer to the Authority.

 (2) If any question arises as to whether the prescribed terms  and conditions of service in respect of any matter, including  remuneration, pension, leave, provident fund and medical  benefits, are less favourable than those attached to the post  held by an officer or other employee immediately before his  transfer to the Authority, the decision of the Central  Government in the matter shall be final.

34. (1) Subject to the provisions of this Act, it shall be the duty  of each Authority to undertake such measures as it thinks fit  for the development, operation and management of the Special  Economic Zone for which it is constituted.  

(2) Without prejudice to the generality of the provisions of  sub-section (1), the measures referred to therein may provide  for -  

 (a) the development of infrastructure in the Special  Economic Zone;  

 (b) promoting exports from the Special Economic  Zone;

Functions of  

Authority.

 (c) reviewing the functioning and performance of the  Special Economic Zone;  

 (d) levy user or service charges or fees or rent for the  use of properties belonging to the Authority;  

 (e) performing such other functions as may be  prescribed.

Grants and  

loans by  

Central  

Government.

35. The Central Government may, after due appropriation  made by Parliament by law in this behalf, make to every  Authority by way of grants and loans such sums of money  as that Government may think fit for being utilised for the  purposes of this Act.

Constitution of  Fund and its  

application.

36. (1) There shall be established by every Authority a Fund  to be called the ……….(the name of the Special Economic  Zone concerned) Authority Fund and there shall be credited  thereto -  

(a) all sums of money, which the Central Government may,  after due appropriation made by Parliament by law in this  behalf, provide to the Authority;

(b) all grants or loans that may be made to the Authority under  this Act;  

(c) all sums received on account of user or service charges or  fees or rent for the use of properties belonging to the  Authority;

(d) all sums received by the Authority from such other sources  as may be decided upon by the Central Government.  

 (2) The Fund shall be applied for meeting –  

(a) the salaries, allowances and other remuneration of the  members, officers and other employees of the Authority;

(b) the expenses of the Authority in the discharge of its  functions under section 34;  

(c) repayment of any loan;  

(d) the expenses on objects and for purposes authorised by this  Act;  

(e) meeting any other administrative expenses of the Authority.

Accounts and

37. (1) Every Authority shall maintain proper accounts and

audit.

other relevant records and prepare an annual statement of  accounts in such form as may be prescribed by the Central  Government, in consultation with the Comptroller and  Auditor-General of India.  

(2) The accounts of every Authority shall be audited by the  Comptroller and Auditor-General of India at such intervals as  may be specified by him and any expenditure incurred in  connection with such audit shall be payable by the Authority to  the Comptroller and Auditor-General of India.

(3) The Comptroller and Auditor-General of India or any  person appointed by him in connection with the audit of the  accounts of the Authority shall have the same rights and  privileges and authority in connection with such audit as the  Comptroller and Auditor-General generally has in connection  with the audit of the Government accounts and, in particular,  shall have the right to demand the production of books,  accounts, connected vouchers and other documents and papers  and to inspect any of the offices of the Authority.  

(4) The accounts of every Authority as certified by the  Comptroller and Auditor-General of India or any other person  appointed by him in this behalf together with the audit report  thereon shall be forwarded annually to the Central Government  and the Central Government shall cause the same to be laid  before each House of Parliament.

Directions by  Central  

Government.

38. Every Authority shall be bound to carry out such  directions as may be issued to it from time to time by the  Central Government for the efficient administration of this Act.

Returns and  

reports.

39. (1) Every Authority shall furnish to the Central  Government at such time and in such form and manner as may  be prescribed or as the Central Government may direct, such  returns and statements and such particulars in regard to the  promotion and development of exports and the operation and  maintenance of the Special Economic Zone and Units as the  Central Government may, from time to time, require.  

 (2) Without prejudice to the provisions of sub-section (1),  every Authority shall, as soon as possible, after the end of each  financial year, submit to the Central Government a report in  such form and before such date, as may be prescribed, giving a  true and full account of its activities, policy and programmes  during the previous financial year.  

 (3) A copy of every report received under sub-section (2)  shall be laid, as soon as may be, after it is received, before each  House of Parliament.

40. (1) If at any time the Central Government is of the opinion  that an Authority is unable to perform, or has persistently made  default in the performance of, the duty imposed on it by or  under this Act or has exceeded or abused its powers, or has  wilfully or without sufficient cause, failed to comply with any  direction issued by the Central Government under section 38,  the Central Government may, by notification, supersede that  Authority for such period not exceeding six months, as may be  specified in the notification:

Power to supersede  Authority.

 Provided that before issuing a notification under this sub section, the Central Government shall give reasonable time to  that Authority to make representation against the proposed  supersession and shall consider the representations, if any, of  the Authority.

(2) Upon the publication of a notification under sub-section (1)  superseding the Authority, -  

 (a) the Chairperson and other Members of the Authority  shall, notwithstanding that their term of office has not expired  as from the date of supersession, vacate their offices as such;  

 (b) all the powers, functions and duties which may, by or  under the provisions of this Act, be exercised or discharged by  or on behalf of the Authority shall, during the period of  supersession, be exercised and performed by such person or  persons as the Central Government may direct;  

 (c) all property vested in the Authority shall, during the  period of supersession, vest in the Central Government.

(3) On the expiration of the period of supersession specified in  the notification issued under sub-section (1), the Central  Government may -  

 (a) extend the period of supersession for such further period  not exceeding six months; or  

 (b) reconstitute the Authority in the manner provided in  section 31.

45 of 1860.

41. All Members, officers and other employees of every  Authority, shall, when acting or purporting to act in pursuance  of any of the provisions of this Act or the rules made  thereunder, be deemed to be public servants within the  meaning of section 21 of the Indian Penal Code.

Members, officers  and other  

employees of  

Authority to be  

public servants.

CHAPTER VIII

MISCELLANEOUS

42.(1) Notwithstanding anything contained in any other law  for the time being in force, if –  

(a) any dispute of civil nature arises among two or more  entrepreneurs or two or more Developers or between an  entrepreneur and a Developer in the Special Economic Zone;  and  

(b) the court or the courts to try suits in respect of such dispute  had not been designated under sub-section (1) of section 23,  

 such dispute shall be referred to arbitration:  

Provided that no dispute shall be referred to the  arbitration on or after the date of the designation of court or  courts under sub-section (1) of section 23.

Reference of  

dispute.

(2) Where a dispute has been referred to arbitration under sub section (1), the same shall be settled or decided by the  arbitrator to be appointed by the Central Government.

.

(3) Save as otherwise provided under this Act, the provisions  of the Arbitration and Conciliation Act, 1996 shall apply to all  arbitration under this Act as if the proceedings for arbitration  were referred in settlement or decision under provisions of the  Arbitration and Conciliation Act, 1996.

26 of 1996

Limitation.

43. (1) The period of limitation in the case of any dispute  which is required to be referred to arbitration shall be regulated  by the provisions of the Limitation Act, 1963, as if the dispute  was a suit and the arbitrator is civil court.

36 of 1963.

(2) Notwithstanding anything contained in sub-section (1), the  arbitrator may admit a dispute after the expiry of the period of  limitation, if the applicant satisfies the arbitrator that he had  sufficient causes for not referring the dispute within such  period.

Applicability  of provisions  

of this Act to  

existing  

Special  

Economic  

Zones.

44. All the provisions of this Act (except sections 3 and 4)  shall, as far as may be apply, to every existing Special  Economic Zones.

Person to  

whom a  

communication  may be sent  

under this Act.

45. A communication by any competent authority or person  under this Act may be sent to the person who has the ultimate  control over the affairs of the Special Economic Zone or Unit  or where the said affairs are entrusted to a manager, director,

chairperson, or managing director, or to any other officer, by  whatever name called, such communication may be sent to  such manager, director, chairperson, or managing director, or  any other officer.

Identity Card.

46. Every person, whether employed or residing or required to  be present in a Special Economic Zone, shall be provided an  identity card by every Development Commissioner of such  Special Economic Zone, in such form and containing such  particulars as may be prescribed.

Autorités  

responsable for  administration.

47. Any authority which, has been conferred upon any power,  or, is, required discharging any function under any Central or  State Act, may, subject to the provisions of this Act, exercise  such powers or discharge such function in any Special  Economic Zone under that Act.

Protection of  

action taken in  good faith.

48. No suit, prosecution or other legal proceeding shall lie  against the Central Government or any Chairperson, Member,  officer or other employee of the Board Approval Committee or  the Authority or Development Commissioner for anything  done or intended to be done in good faith under this Act.

Power to  

modify  

provisions of  this Act or  

other  

enactments in  relation to  

Special  

Economic  

Zones.

49. (1) The Central Government may, by notification, direct  that any of the provisions of this Act (other than sections 54  and 56) or any other Central Act or any rules or regulations  made thereunder or any notification or order issued or direction  given thereunder (other than the provisions relating to making  of the rules or regulations) specified in the notification--  

(a) shall not apply to a Special Economic Zone or a class of  Special Economic Zones or all Special Economic Zones; or  

(b) shall apply to a Special Economic Zone or a class of  Special Economic Zones or all Special Economic Zones only  with such exceptions, modifications and adaptation, as may be  specified in the notification.  

Provided that nothing contained in this section shall apply to  any modifications of any Central Act or any rules or  regulations made thereunder or any notification or order issued  or direction given or scheme made thereunder so far as such  modification, rule, regulation, notification, order or direction or  scheme relates to the matters relating to trade unions, industrial  and labour disputes, welfare of labour including conditions of  work, provident funds, employers’ liability, workmen’s  compensation, invalidity and old age pensions and maternity  benefits applicable in any Special Economic Zones.

(2) A copy of every notification proposed to be issued under

sub-section (1), shall be laid in draft before each House of  Parliament, while it is in session, for a total period of thirty  days which may be comprised in one session or in two or more  successive sessions, and if, before the expiry of the session  immediately following the session or the successive sessions  aforesaid, both Houses agree in disapproving the issue of the  notification or both Houses agree in making any modification  in the notification, the notification shall not be issued or, as the  case may be, shall be issued only in such modified form as  may be agreed upon by both the Houses.

50. The State Government may, for the purposes of giving  effect to the provisions of this Act, notify policies for  Developers and Units and take suitable steps for enactment of  any law:-  

(a) granting exemption from the State taxes, levies and  duties to the Developer or the entrepreneur;  

(b) delegating the powers conferred upon any person or  authority under any State Act to the Development  Commissioner in relation to the Developer or the  entrepreneur.  

Power of State  

Government to  

grant exemption.

51. (1) The provisions of this Act shall have effect  notwithstanding anything inconsistent therewith contained in  any other law for the time being in force or in any instrument  having effect by virtue of any law other than this Act.

Act to have  

overriding effect.

52 of 1962

52. The provision contained in the Chapter X-A of the  Customs Act, 1962 and the Special Economic Zones Rules,  2003 and the Special Economic Zones (Customs Procedure)  Regulations, 2003 made thereunder shall not with effect from  such date as the Central Government by notification appoint,  apply to the Special Economic Zones.  

(2) Notwithstanding anything contained in sub-section (1), all  offences committed, before the commencement of this Act,  under any provisions of Customs Act, 1962 and the Special  Economic Zones Rules, 2003 and the Special Economic Zones  (Customs Procedure) Regulations, 2003 made thereunder, shall  continue to be governed by the said Act or rules, as the case  may be.

Certain provisions  not to apply.

(3) Anything done or any action taken or purported to have  been done or taken including any rule, notification, inspection,  order or notice made or issued or any permission, authorisation  or exemption granted or any document or instrument executed  under the said provisions of the Act, rules and regulations  referred to in sub-section (1) shall, in so far as they are not  inconsistent with the provisions of this Act, be deemed to have

been done or taken or made or issued or granted under the  corresponding provisions of the Act or rules referred to in that  sub-section.

52 of 1962.

53. A Special Economic Zone shall, on and from the  appointed day, be deemed to be a territory outside the customs  territory of India for the purposes of undertaking the authorized  operations.  

(2) A Special Economic Zone shall, with effect from such date  as Central Government may notify, be deemed to be a port,  inland container depot, land station and land customs stations,  as the case may be, under section 7 of the Customs Act, 1962:  

 Provided that for the purposes of this section, the  Central Government may notify different dates for different  Special Economic Zones.

Special Economic  Zones to be ports,  airports, inland  

container depots,  land stations, etc.  in certain cases.

54. (1) The Central Government may, having regard to the  objects of this Act, and if it considers necessary or expedient  so to do, by notification add to, or as the case may be, omit  from the First Schedule any enactment specified therein.  

(2) A copy of every notification proposed to be issued under  sub-section (1), shall be laid in draft before each House of  Parliament, while it is in session, for a total period of thirty  days which may be comprised in one session or in two or more  successive sessions, and if, before the expiry of the session  immediately following the session or the successive sessions  aforesaid, both houses agree in disapproving the issue of the  notification or both Houses agree in making any modification  in the notification, the notification, the notification shall not be  issued or, as the case may be , shall be issued only in such  modified form as may be agreed upon by both the House.

Amendment to  

First Schedule.

55. (1) The Central Government may, by notification, make  rules for carrying out the provisions of this Act.  

(2) In particular, and without prejudice to the generality of  the foregoing power, such rules may provide for all or any of  the following matters, namely:-

Power to make  

rules.

(a) the infrastructure facilities necessary for the development  of the Special Economic Zones under clause (p) and services in  the Special Economic Zones under clause (z) of section 2;  

(b) the period within which the person concerned shall obtain  the concurrence of the State Government under sub-section (3)  of section 3;

(c) the form and the manner in which a proposal may be made  and the particulars to be contained therein under sub-section  (5) of section 3;  

(d) the period within which the State Government may  forward the proposal together with its recommendation under  sub-section (6) of section 3;

(e) the requirements subject to which the Board may approve,  modify or reject the proposal under sub-section (8) of section  3;

(f) the period within which the grant of letter of approval shall  be communicated to the State Government or Developer or  entrepreneur under sub-section (10) of section 3;

(g) the other requirements for notifying the specifically  identified area in a State as a Special Economic Zone under  sub-section (1) of section 4;

(h) the terms, conditions and limitations subject to which the  goods or services exported out of, or imported into, or  procured from the Domestic Tariff Area to, a Special  Economic Zone, be exempt from payment of taxes, duties or  cess under section 7;  

(i) the procedure for transfer of letter of approval in case of  suspension of letter of approval of a Developer under clause  (a) of sub-section (9) of section 10;  

(j) the form and the manner in which a proposal may be  submitted and the particulars to be contained therein under  sub-section (1) of section 15;

(k) the time within which a person aggrieved by the order of  the Approval Committee may prefer an appeal under sub section (4) of section 15;  

(l) the form in which the appeal shall be made and the fees for  making such appeal under sub-section (6) of section 15;  

(m) the procedure for disposing of an appeal under sub section (7) of section 15;  

(n) the requirements (including the period for which a unit  may be set up) subject to which the proposal may be  approved, modified or rejected under clause (a) of sub-section  (8) of section 15;

(o) the terms and conditions, for the Unit subject to which it

shall undertake authorised operations under clause (b) of sub section (8) of section 15 and the obligations and entitlements  of the Unit;  

(p) the time within which a person aggrieved by the order of  the Approval Committee may prefer an appeal under sub section (4) of section 16;  

(q) the form in which the appeal shall be made and the fees  for making such appeal under sub-section (6) of section 16;  

(r) the procedure for disposing of an appeal under sub-section  (7) of section 16;

(s) the form and the manner in which an application may be  made for setting up of an Offshore Banking Unit in a Special  Economic Zone under sub-section (1) of section 17; and

(t) the requirements for setting up and operation of an  International Financial Services Centre in a Special Economic  Zone under sub-section (1) of section 18 ;  

(u) the requirements and terms and conditions subject to which  a Unit in the International Financial Services Centre may be set  up and operated in Special Economic Zone under sub-section  (2) of section 18;  

(v) the form of single application for obtaining any licence,  permission or registration or approval under clause (a) of  section 19;  

(w) the form of single return or information to be furnished by  an entrepreneur or Developer under clause (c) of section 19;

(x) the manner in which and the terms and the conditions  subject to which the exemptions concessions, draw back or  other benefits shall be granted to every Developer and  entrepreneur under sub-section (2) of section 26;  

(y) the period during which any goods brought into, or services  provided in, any Special Economic Zone shall remain or  continue to be provided in such Unit or Special Economic  Zone under section 28;

(z) the terms and conditions subject to which transfer in  ownership of any goods brought into, or produced or  manufactured in, any Unit or Special Economic Zone, or  removal thereof from such Unit or the Zone, shall be allowed  under section 29;  

(za) the conditions subject to which the Units shall be entitled

to sell the goods manufactured in a Special Economic Zone to  the Domestic Tariff Area under section 30;

(zb) the term of office of the Members, other than ex officio Members, of every Authority and the manner of filling of  vacancies under sub-section (6) of section 31;  

(zc) the manner in which and the conditions subject to which  and the purposes for which any person may be associated  under sub-section (7) of section 31;  

(zd) the times and the places of meetings and the procedure to  be followed in the transaction of business meeting under sub section (10) of section 31;

(ze) the powers and the functions of every Development  Commissioner under sub-section (1) of section 32;  

(zf) the method of appointment of officers and other employees  of every Authority, conditions of their service and the scale of  pay and allowances under sub-section (3) of section 32;  

(zg) the other functions to be performed by the Authority  under clause (e) of sub-section (2) of section 34;

(zh) the form in which the accounts and other relevant records  of every Authority shall be maintained and annual statement  of accounts shall be prepared under sub-section (1) of section  37;  

(zi) the form and the manner in which and the time at which  every Authority shall furnish returns and statements and other  particulars to the Central Government under sub-section (1) of  section 39;  

(zj) the form in which and the date before which every  Authority shall furnish to the Central Government the report of  its activities, policy and programmes under sub-section (2) of  section 39;

(zk) the form in which and the particulars to be contained in the  identity cards under section 46;  

(zl) any other matter which is to be, or may be, prescribed.

 (3) Every rule made by the Central Government under this  Act shall be laid, as soon as may be after it is made, before  each House of Parliament while it is in session, for a total  period of thirty days which may be comprised in one session or  in two or more successive sessions, and if, before the expiry of  the session immediately following the session or the successive  sessions aforesaid, both Houses agree in making any

modification in the rule or both Houses agree that the rule  should not be made, the rule shall thereafter have effect only in  such modified form or be of no effect, as the case may be; so  however, that any such modification or annulment shall be  without prejudice to the validity of anything previously done  under that rule.

Power to  

remove  

difficulties.

 56. (1) If any difficulty arises in giving effect to the provisions  of this Act, the Central Government may, by order published in  the Official Gazette, make such provisions not inconsistent  with the provisions of this Act, as may appear to it to be  necessary or expedient for removing the difficulty:  

 Provided that no such order shall be made under this  section after the expiration of two years from the date of  commencement of this Act.  

(2) Every order made under this section shall be laid, as soon  as may be after it is made, before each House of Parliament.

Amendment of  certain  

enactments.

57. With effect from such date as the Central Government  may by notification appoint, the enactments specified in the  Third Schedule shall be amended in the manner specified  therein:  

 Provided that different dates may be appointed on  which the amendments specified in the Third Schedule shall  apply to a particular Special Economic Zone or a class of  Special Economic Zones or all Special Economic Zones.

Savings.

58. All rules made or purporting to have been made or all  notifications issued or purporting to have been issued under  any Central Act relating to the Special Economic Zone shall, in  so far as they relate to matters for which provision is made in  this Act or rules made or notification issued thereunder and are  not inconsistent therewith, be deemed to have been made or  issued under this Act as if this Act had been in force on the  date on which such rules were made or notifications were  issued and shall continue to be in force unless and until they  are superseded by any rules made or notifications issued under  this Act.

(a) in section 10,-

 (A) in clause (15), after sub-clause (vii), the following  clause shall be inserted at the end, namely:-  

“(viii) any income by way of interest received by a non-resident  or a person who is not ordinarily resident, in India on a deposit  made on or after the 1st day of April, 2005 in an Offshore  Banking Unit referred to in clause (u) of section 2 of the  Special Economic Zones Act, 2005;”;

 (B) in clause (23G), after the words, brackets, figures  and letters “sub-section (4) of section 80-IA”, the words  brackets, figures and letters “or sub -section (3) of section 80- IAB.” shall be inserted;

 (C) in clause (34), the following Explanation shall be  inserted, namely:-  

“Explanation.- For the removal of doubts, it is hereby declared  that the dividend referred to in section 115-O shall not be  included in the total income of the assessee, being a Developer  or entrepreneur.”;

(b) in section 10A, after sub-section (7A), the following sub section shall be inserted, namely:-  

“(7B) The provisions of this section shall not apply to any  undertaking, being a Unit referred to in clause (zc) of section 2  of the Special Economic Zones Act, 2005, which has begun or  begins to manufacture or produce articles or things or computer  software during the previous year relevant to the assessment  year commencing on or after the 1st day of April, 2006 in any  Special Economic Zone.”;

Special  

provisions in  

respect of newly  established Units  in Special  

Economic  

Zones.

(c) after section 10A, the following section shall be inserted,  namely:-  

‘10AA. (1) Subject to the provisions of this section, in  computing the total income of an assessee, being an  entrepreneur as referred to in clause (j) of section (2) of the  Special Economic Zones Act, 2005, from his Unit, who begins

to manufacture or produce articles or things or provide any  services during the previous year relevant to any assessment  year commencing on or after the 1st day of April, 2006, a  deduction of –

(i) hundred per cent. of profits and gains derived from the  export, of such articles or things or from services for a  period of five consecutive assessment years beginning with  the assessment year relevant to the previous year in which  the Unit begins to manufacture or produce such articles or  things or provide services, as the case may be, and fifty per  cent. of such profits and gains for further five assessment  years and thereafter;  

(ii) for the next five consecutive assessment years, so much  of the amount not exceeding fifty per cent. of the profit as is  debited to the profit and loss account of the previous year in  respect of which the deduction is to be allowed and credited  to a reserve account (to be called the "Special Economic  Zone Re-investment Reserve Account") to be created and  utilised for the purposes of the business of the assessee in the  manner laid down in sub-section (2).

(2) The deduction under clause (ii) of sub-section (1) shall be  allowed only if the following conditions are fulfilled, namely:-  

(a) the amount credited to the Special Economic Zone Re investment Reserve Account is to be utilised-  

 (i) for the purposes of acquiring machinery or plant  which is first put to use before the expiry of a period of three  years following the previous year in which the reserve was  created; and  

 (ii) until the acquisition of the machinery or plant as  aforesaid, for the purposes of the business of the undertaking  other than for distribution by way of dividends or profits or for  remittance outside India as profits or for the creation of any  asset outside India;

(b) the particulars, as may be specified by the Central Board  of Direct Taxes in this behalf, under clause (b) of sub section (IB) of section 10A have been furnished by the  assessee in respect of machinery or plant along with the  return of income for the assessment year relevant to the  previous year in which such plant or machinery was first put  to use.

(3) Where any amount credited to the Special Economic Zone  Re-investment Reserve Account under clause (ii) of sub section (1),-

 (a) has been utilised for any purpose other than those  referred to in sub-section (2), the amount so utilised; or

 (b) has not been utilised before the expiry of the period  specified in sub-clause (i) of clause (a) of sub-section (2), the  amount not so utilised,  

shall be deemed to be the profits,-  

(i) in a case referred to in clause (a), in the year in which the  amount was so utilised; or  

(ii) in a case referred to in clause (b), in the year  immediately following the period of three years specified in  sub-clause (i) of clause (a) of sub-section (2),  

and shall be charged to tax accordingly:

 Provided that where in computing the total income of  the Unit for any assessment year, its profits and gains had not  been included by application of the provisions of sub-section  (7B) of section 10A, the undertaking being the Unit shall be  entitled to deduction referred to in this sub-section only for the  unexpired period of ten consecutive assessment years and  thereafter it shall be eligible for deduction from income as  provided in clause (ii) of sub-section (1):

Explanation.- For the removal of doubts, it is hereby declared  that an undertaking being the Unit, which had already availed  before the commencement of the Special Economic Zone Act,  2005, the deductions referred to in section 10A for ten  consecutive assessment years, such Unit shall not be eligible  for deduction from income under this section.

 Provided further that where a Unit initially located in  any free trade zone or export processing zone is subsequently  located in a Special Economic Zone by reason of conversion of  such free trade zone or export processing zone into a Special  Economic Zone, the period of ten consecutive assessment years  referred to above shall be reckoned from the assessment year  relevant to the previous year in which the Unit began to  manufacture, or produce or process such articles or things or  services in such free trade zone or export processing zone:

Provided also that where a Unit initially located in any free  trade zone or export processing zone is subsequently located in  a Special Economic Zone by reason of conversion of such free  trade zone or export processing zone into a Special Economic  Zone and has completed the period of ten consecutive  assessment years referred to above, it shall not be eligible for  deduction from income as provided in clause (ii) of sub-section  (1) with effect from the 1st day of April, 2006.

(4) This section applies to any undertaking being the Unit,  which has begun or begins to manufacture or produce articles  or things or services during the previous year relevant to the  assessment year commencing on or after the 1st day of April,  2006, in any Special Economic Zone;

(5) Where any undertaking being the Unit which is entitled to  the deduction under this section is transferred, before the expiry  of the period specified in this section, to another undertaking,  being the Unit in a scheme of amalgamation or demerger,-  

(a) no deduction shall be admissible under this section to the  amalgamating or the demerged Unit, being the company  for the previous year in which the amalgamation or the  demerger takes place; and  

(b) the provisions of this section shall, as they would have  applied to the amalgamating or the demerged Unit being  the company as if the amalgamation or demerger had not  taken place.

(6) Loss referred to in sub-section (1) of section 72 or sub section (1) or sub-section (3) of section 74, in so far as such  loss relates to the business of the undertaking, being the Unit  shall be allowed to be carried forward or set off.

(7) For the purposes of sub-section (1), the profits derived from  the export of articles or things or services (including computer  software) shall be the amount which bears to the profits of the  business of the undertaking, being the Unit, the same  proportion as the export turnover in respect of such articles or  things or services bears to the total turnover of the business  carried on by the assessee.  

(8) The provisions of sub-sections (5) and (6) of section 10A  shall apply to the articles or things or services referred to in  sub-section (1) as if –  

 (a) for the figures, letters and word “1st April, 2001”,  the figures, letters and word “1st April, 2006” had been  substituted;  

 (b) for the word “undertaking”, the words “undertaking,  being the Unit” had been substituted.

(9) The provisions of sub-section (8) and sub-section (10) of  section 80-IA shall, so far as may be, apply in relation to the  undertaking referred to in this section as they apply for the  purposes of the undertaking referred to in section 80-IA.

Explanation 1.- For the purposes of this section,-  

(i) "export turnover" means the consideration in respect of  export by the undertaking, being the Unit of articles or things  or services received in, or brought into, India by the assessee  but does not include freight, telecommunication charges or  insurance attributable to the delivery of the articles or things  outside India or expenses, if any, incurred in foreign exchange  in rendering of services (including computer software) outside  India;

(ii) "export” in relation to the Special Economic Zones” means  taking goods or providing services out of India from a Special  Economic Zone by land, sea, air, or by any other mode whether  physical or otherwise;  

(iii) “manufacture” shall have the same meaning as assigned to  it in clause (r) of section 2 of the Special Economic Zones Act,  2005;

(iv) "relevant assessment year" means any assessment year  falling within a period of fifteen consecutive assessment years  referred to in this section;  

(v) “Special Economic Zone” and “Unit” shall have the same  meanings as assigned to them under clause (za) and (zc) of  section 2 of the Special Economic Zones Act, 2005.

Explanation 2. – For the removal of doubts, it is hereby  declared that the profits and gains derived from on site  development of computer software (including services for  development of software) outside India shall be deemed to be  the profits and gains derived from the export of computer  software outside India;

(d) after section 54G, the following section shall be inserted,  namely:-  

“54GA. (1) Notwithstanding anything contained in section  54G, where the capital gain arises from the transfer of a capital  asset, being machinery or plant or building or land or any rights  in building or land used for the purposes of the business of an  industrial undertaking situate in an urban area, effected in the  course of, or in consequence of the shifting of such industrial  undertaking to any Special Economic Zone, whether developed  in any urban area or any other area and the assessee has within  a period of one year before or three years after the date on  which the transfer took place, -

Exemption of  

capital gains on  transfer of assets  in cases of  

shifting of  

industrial  

undertaking from  urban area to any  Special  

Economic Zone.

(a) purchased machinery or plant for the purposes of  business of the industrial undertaking in the Special  Economic Zone to which the said undertaking is  shifted;

(b) acquired building or land or constructed building for  the purposes of his business in the Special Economic  Zone;  

(c) shifted the original asset and transferred the  establishment of such undertaking to the Special  Economic Zone; and

(d) incurred expenses on such other purposes as may be  specified in a scheme framed by the Central  Government for the purposes of this section,  

then, instead of the capital gain being charged to income-tax as  income of the previous year in which the transfer took place, it  shall, subject to the provisions of sub-section (2), be dealt with  in accordance with the following provisions of this section, that  is to say, -

(i) if the amount of the capital gain is greater than the  cost and expenses incurred in relation to all or any of the  purposes mentioned in clauses (a) to (d) (such cost and  expenses being hereafter in this section referred to as the  new asset), the difference between the amount of the capital  gain and the cost of the new asset shall be charged under  section 45 as the income of the previous year; and for the  purpose of computing in respect of the new asset any capital  gain arising from its transfer within a period of three years of  its being purchased, acquired, constructed or transferred, as  the case may be, the cost shall be nil; or

(ii) if the amount of the capital gain is equal to, or less  than, the cost of the new asset, the capital gain shall not be  charged under section 45; and for the purpose of computing  in respect of the new asset any capital gain arising from its  transfer within a period of three years of its being purchased,  acquired, constructed or transferred, as the case may be, the  cost shall be reduced by the amount of the capital gain.

Explanation.-In this sub-section,-  

 (a) “Special Economic Zone” shall have the meaning  assigned to it in clause (za) of the Special Economic Zones Act,  2005;  

 (b) “urban area” means any such area within the limits

of a municipal corporation or municipality as the Central  Government may, having regard to the population,  concentration of industries, need for proper planning of the area  and other relevant factors, by general or special order, declare  to be an urban area for the purposes of this sub-section.

(2) The amount of capital gain which is not appropriated by the  assessee towards the cost and expenses incurred in relation to  all or any of the purposes mentioned in clauses (a) to (d) of  sub-section (1) within one year before the date on which the  transfer of the original asset took place, or which is not utilised  by him for all or any of the purposes aforesaid before the date  of furnishing the return of income under section 139, shall be  deposited by him before furnishing such return [such deposit  being made in any case not later than the due date applicable in  the case of the assessee for furnishing the return of income  under sub-section (1) of section 139] in an account in any such  bank or institution as may be specified in, and utilised in  accordance with, any scheme which the Central Government  may, by notification, frame in this behalf and such return shall  be accompanied by proof of such deposit; and, for the purposes  of sub-section (1), the amount, if any, already utilised by the  assessee for all or any of the aforesaid purposes together with  the amount so deposited shall be deemed to be the cost of the  new asset:

 Provided that if the amount deposited under this sub section is not utilised wholly or partly for all or any of the  purposes mentioned in clauses (a) to (d) of sub-section (1)  within the period specified in that sub-section, then, -

 (i) the amount not so utilised shall be charged under  section 45 as the income of the previous year in which the  period of three years from the date of the transfer of the  original asset expires; and  

 (ii) the assessee shall be entitled to withdraw such  amount in accordance with the scheme aforesaid.”;

(e) in section 80-IA, after sub-section (12), the  following section shall be inserted, namely:-  

“(13) nothing contained in this section shall apply to any  Special Economic Zones notified on or after the 1st day of  April, 2005 in accordance with the scheme referred to in sub clause (iii) of clause (c) of sub-section (4)”.

(f) after section 80-IA, the following section shall be inserted,  namely:-

Deductions in

“80-I AB. (1) Where the gross total income of an assessee,

respect of profits  and gains by an  undertaking or  enterprise  

engaged in  

development of  Special  

Economic Zone.

being a Developer, includes any profits and gains derived by an  undertaking or an enterprise from any business of developing a  Special Economic Zone, notified on or after the 1st day of  April, 2005 under the Special Economic Zone Act, 2005, there  shall, in accordance with and subject to the provisions of this  section, be allowed, in computing the total income of the  assessee, a deduction of an amount equal to one hundred per  cent. of the profits and gains derived from such business for ten  consecutive assessment years.

(2) The deduction specified in sub-section (1) may, at  the option of the assessee, be claimed by him for any ten  consecutive assessment years out of fifteen years beginning  from the year in which a Special Economic Zone has been  notified by the Central Government:  

 Provided that where in computing the total income of  any undertaking, being a Developer for any assessment year, its  profits and gains had not been included by application of the  provisions of sub-section (13) of section 80-1A, the  undertaking being the Developer shall be entitled to deduction  referred to in this section only for the unexpired period of ten  consecutive assessment years and thereafter it shall be eligible  for deduction from income as provided in sub-section (1) or  sub-section (2) as the case may be:  

 Provided further that in a case where an undertaking,  being a Developer who develops a Special Economic Zone on  or after the 1st day of April, 2005 and transfers the operation  and maintenance of such Special Economic Zone to another  Developer (hereafter in this section referred to as the transferee  Developer), the deduction under sub-section (1) shall be  allowed to such transferee Developer for the remaining period  in the ten consecutive assessment years as if the operation and  maintenance were not so transferred to the transferee  Developer.

(3) The provisions of sub-sections (5) and sub-sections (7) to  (12) of section 80-IA shall apply to the Special Economic  Zones for the purpose of allowing deductions under sub-section  (1).  

Explanation.- For the purposes of this section, “Developer” and  “Special Economic Zone” shall have the same meanings  respectively as assigned to them in clauses (g) and (za) of  section 2 of the Special Economic Zones Act, 2005”;

.

(g) for section 80LA, the following section shall be  substituted, namely:–

Deduction in  

respect of certain  incomes of  

Offshore

‘80LA. (1) Where the gross total income of an assessee,—  (i) being a scheduled bank, or, any bank incorporated by or  under the laws of a country outside India; and having an  Offshore Banking Unit in a Special Economic Zone; or  

(ii) being a Unit of an International Financial Services Centre,  

includes any income referred to in sub-section (2), there shall  be allowed, in accordance with and subject to the provisions of  this section, a deduction from such income, of an amount equal  to—

Banking Units  

and International  Financial  

Services Centre

10 of 1949.  

15 of 1992

 (a) one hundred per cent of such income for five  consecutive assessment years beginning with the assessment  year relevant to the previous year in which the permission,  under clause (a) of sub-section (1) of section 23 of the Banking  Regulation Act, 1949 or permission or registration under the  Securities and Exchange Board of India Act, 1992 or any other  relevant law was obtained, and thereafter;  

 (b) fifty per cent. of such income for five  consecutive assessment years.

10 of 1949.

(2) The income referred to in sub-section (1) shall be the in come—  

 (a) from an Offshore Banking Unit in a Special  Economic Zone; or  

 (b) from the business referred to in sub-section (1) of  section 6 of the Banking Regulation Act, 1949 with an  undertaking located in a Special Economic Zone or any other  undertaking which develops, develops and operates or  develops, operates and maintains a Special Economic Zone; or  

 (c) from any Unit of the International Financial Services  Centre from its business for which it has been approved for  setting up in such a Centre in a Special Economic Zone.

(3) No deduction under this section shall be allowed unless the  assessee furnishes along with the return of income,—  

 (i) the report, in the form specified by the Central  Board of Direct Taxes under clause (i) of sub-section (2) of  section 80LA, as it stood immediately before its substitution by  this section, of an accountant as defined in the Explanation  below sub-section (2) of section 288, certifying that the  deduction has been correctly claimed in accordance with the  provisions of this section; and

10 of 1949

 (ii) a copy of the permission obtained under clause  (a) of sub-section (1) of section 23 of the Banking Regulation  Act, 1949.  

Explanation.—For the purposes of this section,—  

(a) “International Financial Services Centre” shall have the  same meaning as assigned to it in clause (q) of section 2 of the  Special Economic Zones Act, 2005;  

(b) “scheduled bank” shall have the same meaning as assigned  to it in clause (e) of section 2 of the Reserve Bank of India Act,  1934;

2 of 1934

(c) “Special Economic Zone” shall have the same meaning as  assigned to it in clause (za) of section 2 of the Special  Economic Zones Act, 2005;  

(d) “Unit” shall have the same meaning as assigned to it in  clause (zc) of section (2) of the Special Economic Zones Act,  2005;

(h) in section 115JB, after sub-section (5), the following sub section shall be inserted, namely:-  

“(6) The provisions of this section shall not apply to the income  accrued or arising on or after the 1st day of April, 2005 from  any business carried on, or services rendered, by an  entrepreneur or a Developer, in a Unit or Special Economic  Zone, as the case may be.”.

(i) in section 115-0, after sub-section (5), the following sub section shall be inserted, namely:-  

 “(6) Notwithstanding anything contained in this section, no tax  on distributed profits shall be chargeable in respect of the total  income of an undertaking or enterprise engaged in developing  or developing and operating or developing, operating and  maintaining a Special Economic Zone for any assessment year  on any amount declared, distributed or paid by such Developer  or enterprise, by way of dividends (whether interim or  otherwise) on or after the 1st day of April, 2005 out of its  current income either in the hands of the Developer or  enterprise or the person receiving such dividend not falling  under clause (23G) of section 10.”;  

(j) in section 197A, after sub-section (1C), the following sub section shall be inserted, namely:-  

‘(1D) Notwithstanding anything contained in this section, no

deduction of tax shall be made by the Offshore banking Unit  from the interest paid-  

(a) on deposit made on or after the 1st day of April, 2005, by a  non-resident or a person not ordinarily resident in India; or    

(b) on borrowings, on or after the 1st day of April, 2005, from a  non-resident or a person not ordinarily resident in India.  

Explanation.- For the purposes of this sub-section “Offshore  Banking Unit” shall have the same meaning as assigned to it in  clause (u) of section 2 of the Special Economic Zones Act,  2005.’.